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Dear Readers

Business Economics wishes its readers a happy and prosperous Diwali, the festival of light. Light symbolizes removal of darkness. The festival, illuminates homes, temples and workspaces with diya-s (oil lamps), candles and lanterns. The festival symbolizes the spiritual “victory of light over darkness, good over evil, and knowledge over ignorance”. On this occasion Mother Lakshmi is worshipped as the gracious bestower of prosperity, happiness and good fortune. Lord Ganesha is also worshipped on this occasion as the dispeller of evil forces and troubles and a gracious grantor of success in enterprise.

Following Diwali we celebrate “Bhai Phota” or “Bhaiya Dooj”. The festival signifies love among brother / brothers and sister / sisters. Sisters pray for the long life of their brothers and brothers vow to protect their sisters from any problem in future. 

According to a legend, Goddess Yamuna observed fast for her twin brother Yamraj’s longevity and well-being. Since then, Bhai Dooj is celebrated. Yamuna invited her brother to her house many times. But Lord Yama was unable to visit her home. At last, he took some time out from his busy schedule and went to Yamuna’s house. Yamuna showed great respect to her brother. She prepared food and offered it to him. Lord Yama was very much pleased. There is also a popular mythological story signifying love among siblings – that of Maa Lakshmi visiting King Bali to make him her brother.

Another festival “Chath” is also celebrated post Diwali. The festival is mainly celebrated in Bihar, Jharkhand and eastern Uttar Pradesh. On this festival, Sun is worshipped along with his sister “Chathi Maiya“. The rituals are observed over three nights and four days. They include holy bathing, fasting and abstaining from drinking water (as a vrata) standing in water and offering prasada and arghya (prayer offerings) to the rising and setting of Sun.

Indian Economy: S&P Global Rating agency reported that India is to become the next fastest growing major economy for the next 3 years and the third largest globally by 2030. India’s GDP grew at 8.2% in FY23-24 and it is currently the 5th largest economy after USA, China, Japan and Germany. India already has the world’s largest population, and by 2035 it is expected to become so huge that it may pose a mounting challenge for the government even to provide for basic needs and services and may require a considerable amount of investment for employment. According to a UN report, India’s population in 2024 is projected at 1.45 billion, and this will peak to 1.69 billion in 2054. After this, India’s population is projected to decline to 1.5 billion by the end of the century in 2100, but the country will still remain the most populous nation on Earth. Significant resources will be required. International Monetary Fund (IMF) has retained India’s GDP growth projection at 7% during FY24-25 and 6.5% during FY25-26. According to IMF global economy is projected to grow at 3.2% in both 2025 and 2026. Intensification of geopolitical rift will adversely impact trade, investment and free flow of human and intellectual capital among countries.

FM Nirmala Sitharaman says India’s role in the world is significant with spending, sharing and engaging constructively with international community for ensuring global peace and prosperity. Government will maintain checks on FDI for national interest. The FM also said that India may need around USD 100 billion FDI annually, compared to the USD 71 billion (including reinvested earnings) achieved in FY23-24. However, the government is open to receiving more than USD 100 billion in future. There has been a surge in rural consumption. RBI has projected India’s GDP to grow at 7.2% in FY 24-25 on the back of strong domestic demand. In one of his speech PM Modi emphasized US fund manager Mark Mobius’ suggestion that foreign investors deposit 50% of their capital in the Indian stock market.

It is the people of Bharat who will be driving the world economy by their hard work, skill and innovations. Government needs to continue with the constructive and supportive policy of promoting savings so as to create productive capital and to support enterprises affected by external factors.

Any enterprise or even an entire industry can be and will be under stress at times, and many a time the cause of such stress is beyond their control. Possible factors:

1. External effects ― (a) global competition resulting in dumping of goods, (b) technology becoming obsolete, (c) go-slow, strikes, low productivity, (d) unions’ militancy, (e) non-payment or delayed payment by debtors, internal and external (f) fall in demand, (g) rise in cost of production, (h) creation of excess capacity, (i) springing up of new industries with large incentives by the government, and (j) incentives like tax holiday, availability of land at subsidised rate, easy access to available natural resources, etc. in some regions in order to promote the setting up of new industry ignoring the impact on existing ones.

2. Changes in government regulations and administrative delays / no action ― (a) frequent policy changes, (b) cancellation of license like that of coal mines, (c) non-payment or long delays in payment by the government and their agencies, (d) reneging on contracts by the government and their agencies, and changing perceptions/assumptions, (e) multi-level and multi-fold approvals leading to administrative delays, (f) fear psychosis in decision making, and (g) public hearing for green environment.

3. Changes in banking regulations ― (a) inadequate funding with banks focusing more on retail segment, (b) stopping of funding if existing loan is defaulted by even one day with the account being treated as NPA, (c) high rates of front charges compounded every month and penal rules of interest, (d) stringent RBI provisioning norms not aligned to market realities, (e) frequent changes in lending norms and compliance norms by regulatory authority, (f) administrative delays leading to heavy time and cost overruns, (g) errors in judgments by professionals in loan evaluations, and (h) inadequate fund given for modernisation and/or balancing equipment.

4. Global trade threats – imports are allowed despite the emphasis on ‘Make in India’, impacting the capacity utilisation and price realisation of existing industries.

IBC: A voluntary group insolvency structure under bankruptcy law is being proposed. Given the interconnectedness of their operations, this will make it easier for stressed companies of a domestic corporate group to resolve their issues together. The framework might give the committees of creditors of different insolvent companies in a group the authority to determine if they should work together to expedite resolution and optimise the benefits or pursue the process independently.

It will not apply to any group’s solvent firms; it will only apply to the insolvent ones only.

Cover Story Start-ups: Around 950 technology start-ups have been established in 2023 alone and more than 31,000 in the last decade. Economic Survey 2024 stated that over 45% of emerging start-ups emerge out of Tier-2 and Tier-3 cities. The owners of start-ups are job creators and not job seekers. A large number of the start-up units are tech-driven. India is the most preferred destination for technology and knowledge service. Several start-ups have achieved unicorn status which means the valuation of the start-up is at USD 1 billion or more. Funding has been declining since first half of 2023. As on 3rd October 2023, India was home to 111 unicorns collectively valued at USD 349.67 billion approximately.

Some start-ups are dealing in waste management, innerwear manufacturing and equipment for pharmaceutical production. They are investing in up skilling their employees in AI and more. The Indian government has approved a Rs.1,000 crore venture capital fund to support space-sector start-ups which is to be deployed over a period of up to five years. The fund will focus on early-stage investments, with an indicative investment range of Rs.10-60 crore. The fund will help start-ups scale, invest in R&D, and expand their workforce. The fund was announced in the 2024 budget by FM Nirmala Sitharaman. 

Conclusion: Prime Minister Narendra Modi said that his third-term government was operating at a never-before-seen pace and scale and that India had emerged as a beacon of hope for a globe beset by many upheavals, including protracted wars. He spoke of India’s ‘Double AI’ advantage where an ‘Aspirational India’ will ride on the manifold benefits that ‘Artificial Intelligence’ has to offer to make this century India’s century.

Government should play the role of a facilitator and keep alive the animal spirit of the entrepreneurs who are putting in the limited capital they have arranged by borrowing from friends and relatives for their dreams. As we are seeing, e-commerce has been replacing the retailers in urban, semi-urban and rural areas, and these entrepreneurs who are job creators are coming under pressure. On top of that, the corporates who had been active in manufacturing are now deviating from their core competence and are also venturing into retail businesses. This is further intensifying the competition for the entrepreneurial class.